Modernising Hong Kong’s Startup Funding:Why Reimbursement No Longer Works

By John D. Evans, CFA Founder & General Manager, SEIML

Hong Kong wants to be a leading innovation hub – but one structural issue is holding back our earliest-stage founders. Most public “funding” schemes only reimburse startups after expenses are paid. Not before, not upfront, not when Founders actually need the capital. This model works for universities and mature R&D teams. But it does not work for new founders building from zero. I took some time to find out why this was.

Reimbursement is not real early-stage capital

Early founders often can’t front HKD 200k–500k+ in expenses. Many have no revenue, limited savings, no collateral, no family backing, etc. This unintentionally excludes young, non-wealthy, technical and returning-diaspora founders – exactly the talent Hong Kong says it wants to attract.

Cashflow delays create market delays. Reimbursement cycles of several months mean slower hiring, prototyping, customer testing, time-to-market. Startups run on speed. A funding model built around slow cash cycles holds them back.

Compliance becomes the focus, not innovation

In this sort of funding model, Founders spend too much time structuring invoices, managing paperwork, fitting work into claim categories. Whereas, what they really should be doing is building, validating, iterating, scaling. A focus on compliance is the opposite of what early-stage innovation needs.

Global peers use upfront or milestone-based funding

Examples of leading innovation economies and their approach:

• milestone payouts (Singapore, New Zealand)

• upfront grants (UK, Canada)

• advanceable funding

These systems recognise that Founders need capital before spending. Hong Kong risks losing startups to ecosystems where early capital is fast, flexible, and founder-aligned.

Time for new thinking

The solution isn’t more money - it’s smarter deployment and here are some practical improvements that still maintain accountability:

• Hybrid model: 30–40% upfront, 60–70% reimbursement.

• Milestone-based funding: Release capital when real progress happens, not when receipts are submitted.

• Faster reimbursement: Move toward a 14–21 day standard.

• Expanded eligible categories: Allow early-stage spending on salaries, pilots, and early GTM work. These are low-risk, high-impact adjustments that align public funding with startup realities.

Final thought

Hong Kong has the talent, ambition, and capital to lead - but the funding model must match Founder needs. A shift toward upfront, milestone-based, or hybrid funding would broaden the Founder pipeline, speed up commercialization, improve outcomes per public dollar, strengthen Hong Kong’s competitiveness against regional hubs.

These are practical, high-impact reforms - and Hong Kong needs to modernise now.